Your credit score is a critical indicator of your overall financial health. It reflects your creditworthiness and directly influences how much you can borrow, the interest rates you qualify for, and the fees you may be required to pay. For anyone planning to purchase a home, refinance, or invest in property, understanding your credit score is not optional—it’s essential.

Your credit score is calculated using information from your credit report, which provides lenders with a snapshot of how responsibly you manage debt over time.

What Makes Up Your Credit Score?

Your credit report typically evaluates the following key factors:

• Payment History – Your track record of making payments on time
• Total Debt Owed – The amount of credit you are currently using
• Length of Credit History – How long your credit accounts have been active
• Types of Credit Used – A mix of credit cards, loans, and other credit products
• Frequency of Credit Applications – How often you apply for new credit

In both Canada and the United States, most lenders rely on the FICO credit score system, which ranges from 300 to 900.

• Higher scores improve your chances of mortgage approval and help secure better loan terms.
• Lower scores can make borrowing more difficult and significantly more expensive.

A Practical Example

• With a credit score of 750 or higher, you may qualify for a mortgage with a lower interest rate and a smaller down payment—potentially saving thousands of dollars over the life of the loan.
• With a score below 600, you may face higher interest rates, larger down payment requirements, and increased monthly payments.

Key Factors That Can Lower Your Credit Score

Understanding what harms your credit is just as important as knowing what improves it.

1. Defaulting on a Loan

One of the most damaging events to your credit profile. A default can remain on your credit report for up to seven years.

2. Late or Missed Payments

Even a single missed payment can cause a noticeable drop in your score, especially if it becomes a pattern.

3. High Credit Utilization

Using more than 30% of your available credit limit signals financial stress to lenders.

4. Frequent Credit Applications

Multiple “hard inquiries” in a short time frame may indicate higher risk and reduce your score.

5. Closing Credit Accounts

Closing long-standing accounts can shorten your credit history, which may negatively affect your score.

Tips for Maintaining a Healthy Credit Score

Maintaining strong credit requires consistency and discipline. Here are proven best practices:

✅ Make timely payments Paying bills on time is the foundation of good credit. Use reminders or automatic payments to avoid missed deadlines.

✅ Manage credit utilization wisely Keep balances below 30% of your available credit to demonstrate responsible usage.

✅ Apply for credit cautiously Only open new accounts when necessary. Frequent applications can temporarily lower your score.

✅ Review your credit report regularly Check for errors or outdated information and dispute inaccuracies promptly.

✅ Build a long-term credit history The longer your credit history, the stronger your profile. If you’re just starting out, a secured credit card can help establish a positive record.

Steps to Rebuild or Improve Your Credit

If your credit score needs improvement, the right approach can make a significant difference.

Review Your Credit Report

Request a free copy from Equifax or TransUnion and review it carefully. Dispute any errors to ensure your report accurately reflects your financial behavior.

Reduce Outstanding Debt

Paying down balances lowers your credit utilization ratio—a major factor in improving your score.

Budget and Pay Promptly

Use a budgeting app or spreadsheet to track expenses and prioritize payments. Consistency builds trust with lenders.

Get Expert Support

If debt feels overwhelming, consider working with a certified credit counselor or financial advisor. Professional guidance can help you develop a personalized, realistic plan to rebuild your credit with confidence.